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Trading with Coinflip Accuracy!!

  • #21
  • Dec 1, 2009 8:58am Dec 1, 2009 8:58am
"Originally posted by Verasace
You will see similair results no matter how many times you run the analysis, and no matter where you start your count from as long as you have a high number of throws (random numbers)
What you're graphing is called a "one-dimensional random walk." You'll only obtain 50% heads and 50% tails in the limit as your sample size approaches infinity. This is the definition of probability.
So the overall odds are 50/50, but again, those odds are relevant upon where you are on the wave.
"Wrong. The probability is exactly 50%, all the time, as defined above. If you had an infinite sample, you'd have exactly 50% heads and 50% tails. This does not mean that any finite sample will have 50% heads and 50% tails, however. Naturally, as your sample size decreases down to one sample, it obviously is either 100% heads or 100% tails."
Annoying Precision
  • #22
  • Dec 1, 2009 9:03am Dec 1, 2009 9:03am
The more trades that are placed are placed the more likely the results are going to be closer to 50/50, a 2:1 MM is what skews the odds in your favor.
Annoying Precision
  • #23
  • Dec 1, 2009 9:06am Dec 1, 2009 9:06am
You could scew the odds further in your favor with the addition of a simple indicator such as MACD where you would only trade long or short based on cross or bar direction or even simple trendline breaks. I think an automated system would be the key.
Annoying Precision
  • #24
  • Dec 1, 2009 11:51pm Dec 1, 2009 11:51pm
Is it me or is this essentially gambling in the trading world? coin flips are 50/50 with no direct personal impact... therefore there is no consideation into the decisions or the outcome... it's entirely on fate... making it a 'game of chance or luck' - gambling...?
  • #25
  • Dec 2, 2009 2:49pm Dec 2, 2009 2:49pm
Its hard to explain to you at this point, when you've learned a little more about the forex I'll get more in depth. A 50/50 hit rate with a 2:1 risk reward is what skus the odds in your favor, this is a very basic explanation because the concept itself has many implications which Im milling through at this point.
Annoying Precision
  • #26
  • Dec 4, 2009 9:46am Dec 4, 2009 9:46am
Quoting erikte279
Where going to be closing the coinflipping portion of the thread, and heres why (Darn!).

Probabilities state that coinflipping is only 50/50 if the process is infinite and im not, makes sense. So throughout a sequence of say, 1,012,345 flips, after 12,345 flips we could possibly run into a million flip loss (not my kinda odds).

What can we reap from this thread, Erik?

[size=3]That through some basic technical analysis we can skew the Probabilities ( I know, I know) in our favor without the possobility...
lol are you talking to yourself inside a single post?
  • #27
  • Jan 18, 2011 8:31pm Jan 18, 2011 8:31pm
Flipping a coin 1,000,000 times - the odds are you will hit a run of the same side 20 times in a row somewhere in there.

So what. that's a 40% draw down. BUT, you should have won oodles by then.
Also, the odds are that you will hit a run of 20 winners in a row too.

The problem is that you will stop out more than 50%. many times it goes in the opposite direction ~30 pips before going the 100pips in it's closing direction.

Back to the drawing board.
  • #28
  • Jan 18, 2011 8:48pm Jan 18, 2011 8:48pm
It's not viable because trading isnt random, a 50/50 would only be viable in a market as random as flipping a coin.

Funny throwback though....have I dummed down since then?

Quoting charts08
Flipping a coin 1,000,000 times - the odds are you will hit a run of the same side 20 times in a row somewhere in there.

So what. that's a 40% draw down. BUT, you should have won oodles by then.
Also, the odds are that you will hit a run of 20 winners in a row too.

The problem is that you will stop out more than 50%. many times it goes in the opposite direction ~30 pips before going the 100pips in it's closing direction.

Back to the drawing board.
Annoying Precision
  • #29
  • Jan 18, 2011 8:56pm Jan 18, 2011 8:56pm
You are right about not being random.
My buddy got sick of losing trades by following the indicators.

He tried the Coin toss. Swears it works. Won 9 out of 10 trades.

He is trying to get up the courage to try it with real money.
Go figure!

Perhaps a small advantage is all you need?
  • #30
  • Last Post: Jan 18, 2011 9:15pm Jan 18, 2011 9:15pm
I cannot be certain because I didnt finish the experiment so I cannot give a definative opinion. What I can tell you is the market dosent move randomly but a coin flip does, that simple negative correlation should tell you that eventually your luck is going to run thin. I't didnt seem like a viable trading plan for the long haul to me.



Quoting charts08
You are right about not being random.
My buddy got sick of losing trades by following the indicators.

He tried the Coin toss. Swears it works. Won 9 out of 10 trades.

He is trying to get up the courage to try it with real money.
Go figure!

Perhaps a small advantage is all you need?
Annoying Precision
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